管理層發言
Hello, and welcome to Citi's Second Quarter 2026 Earnings Call. Today's call will be hosted by Jennifer Landis, Head of Citi Investor Relations. We ask that you please hold all questions until the completion of the formal remarks at which time you will be given instructions for the question and answer session. Also as a reminder, this conference is being recorded today. If you have any objections, please disconnect at this time. Ms. Landis, you may begin.
Thank you, operator. Good morning, and thank you all for joining our second quarter 2026 earnings call. I am joined today by our chair and chief executive officer, Jane Nind Fraser, and our chief financial officer, Gonzalo Lucchetti. I would like to remind you that today's presentation, which is available for download on our website, citigroup.com, may contain forward-looking statements which are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from these statements due to a variety of factors, including those described in our earnings materials as well as in our SEC filings. And with that, I will turn it over to Jane.
Thank you, Jennifer, and good morning to everyone. Our momentum continued, and the second quarter capped a very good first half of the year. This morning, we reported net income of $5.8 billion for the second quarter, with an EPS of $3.15 and an ROTCE of 13%. This was Citi's best quarterly revenue in a decade, which we delivered with over 9% positive operating leverage. Once again, we saw double-digit revenue growth for the firm and in four of our five businesses. We improved our ROTCE for the firm by 430 basis points, and had significant improvement in the returns of every single business. The combination of our investments, disciplined execution, and focus on clients is delivering improved returns and more durable results. Let me take you through our five businesses. Services delivered its highest ever quarterly revenue and an ROTCE of over 30%. Clients continue to lean on our global network more and more. We saw a 13% increase in cross-border transactions and a 19% increase in deposits. Our assets under custody and administration were up over 20% as we onboarded funds and deepened existing relationships. This is the power of our network, and it is a franchise that is very hard to replicate. Markets revenues were up 17% and crossed $7 billion again, as sentiment stayed positive throughout the quarter. Equities was up over 40% with prime balances up nearly 60%. Fixed income was up 7% growth; FX and spread products continued to shine, in yet another example of our global network doing exactly what it is built to do for clients. This offset rates' lower performance. Banking revenues climbed 34%, led by a sharp increase in financing activity amidst an overall strong wallet. Investment banking was up 44% as we gained share in equity capital markets. We played a role in the majority of the top equity and debt issuances in the quarter, including lead roles on high-profile IPOs such as SpaceX and Cerebras. As we enter the second half, the pipeline looks healthy. We are continuing to invest in talent to fill the gaps in our coverage to gain share, including in M&A. Wealth revenues increased for the ninth straight quarter, up 13%, with growth across all three businesses, and returns improved to over 14%. Client investment assets were up 14% and net new investment assets have reached $30 billion so far this year. Almost two-thirds of that NNIA growth came from deepening relationships with our existing clients, and referrals from the retail bank to Citigold were up 23%. You are now starting to see the tangible benefits of integrating our retail branches into wealth. In U.S. Consumer Cards, investments in our product and partners—which show up in both revenues and expenses—impacted our operating leverage this quarter, but these investments, such as our acquisition of the additional American Airlines Barclays portfolio in April, along with our strongest showing in the Fed stress test last month, position us well. We plan to increase our dividend by 12% and launched a $30 billion common stock repurchase commitment, buying back $4 billion during the quarter. Our CET1 ratio stood at 12.8% and remains about 120 basis points above our current regulatory minimum. We continued to make progress in our transformation with a large body of work passing internal audit validation. As much of the transformation work winds down, we are not only taking down expenses, we are applying what we learned about large-scale implementation to integrate AI into our businesses and functions wherever it makes sense. Nearly nine out of ten of our people are using our AI tools. That is not only driving productivity and client experience, but also growth—helping us bring products to market significantly faster, as we are doing with Payment Express in Services and with our Citi Wealth Advisor Insights platform. On the macro front, the conflict in the Middle East has weighed a bit on global growth while giving inflation a second wind. In the U.S., growth is roughly where it was a year ago, and the labor market remains stable, but it is a nuanced story because that growth is not lifting all boats. The extraordinary investment in AI and its supporting cast of semiconductors, data centers, and related infrastructure is providing a tailwind in the U.S. and parts of Asia, while a more vulnerable Europe faces yet another competitive headwind. Above all these dynamics, we see real resiliency in our corporate clients who bring strong balance sheets and a proven adeptness at managing the complex environment. You have heard me say many times that Citi's success will not follow a straight line. The rigor and consistency with which we have executed the strategy we first laid out for you in 2022 and reinforced at our investor day in May has put Citi back in the game, and our people deserve enormous credit for getting us to this position. We have elevated Citi into a new growth mode. Our returns are improving, and the conversation around this firm has changed. We continue to do the things we said we would do, such as investing in the businesses while we take down transformation and stranded costs. Despite the usual seasonality in the second half of the year, we feel very good about our ability to hit our 2026 return target and then to reach the targets we shared with you in May. And to be clear, if conditions stay constructive, we intend to take advantage of that. We will lean in with additional investments and other actions to create value for our shareholders over the medium term. A stronger environment is not just upside to report; it is an opportunity we will put to work. Finally, as you are all aware, this is Jennifer Landis' final earnings call before she becomes our CFO for Markets. Jennifer came to Citi almost five years ago, just after I became CEO. Over that time, she has reestablished trust and credibility with the investor community, and we built our investor relations team which is now recognized as one of the best. You can see her fingerprints on our disclosures, our financial communications, and events such as our recent Investor Day. She has worked tirelessly to make sure you understand where we are going and how we will get there. So, Jennifer, thank you very much indeed. Before I turn it over to Gonzalo, I would like to thank FIFA for scheduling Argentina's semifinal match in Atlanta for tomorrow and not for today; I shudder to think what choice Gonzalo would have made in that situation. Gonzalo, over to you, and then we will be delighted, as always, to take your questions.
Thank you, Jane, and good morning, everyone. First, I can neither confirm nor deny what decision I would have made in that situation. Second, I would like to echo Jane's sentiment regarding Jennifer's final earnings call as head of investor relations. Jennifer has been a great partner to Jane and to the broader leadership team. Since taking over investor relations in 2021, she has built strong relationships across the investor and analyst community and helped to ensure that Citi's strategy is communicated with clarity, credibility, and consistency. We look forward to seeing her continue to make an impact in her new role. On behalf of the entire management team, thank you, Jennifer, for your leadership, your counsel, and your many contributions. I am also very pleased to have Margot Pillich stepping into the role of head of Strategy, M&A, and Investor Relations. Margot comes to this role after five years as Jane's chief of staff and brings deep knowledge of our strategy priorities and organization after more than two decades at the firm. I look forward to working with Margot in her new role, and I know she will do a tremendous job. Now, getting to the quarter, I will start with the firmwide financial results, focusing on year-over-year comparisons unless I indicate otherwise. On slide 4, we show financial results for the full firm, which demonstrate the progress we have made and the momentum of our strategy. This quarter, we reported net income of $5.8 billion, EPS of $3.15 and an ROTCE of 13% on $24.8 billion of revenues, generating positive operating leverage. Total revenues were up 14%, with growth driven by each of our businesses and legacy franchises, including the impact of FX translation, partially offset by a decline in Corporate Other. Net interest income excluding Markets, which you can see on the bottom left side of the slide, was up 6% driven by growth across all businesses and legacy franchises, partially offset by a decline in Corporate Other. Non-interest revenues excluding Markets were up 39%, driven by growth in all other Banking, Services and Wealth, partially offset by a decline in U.S. Consumer Cards. Excluding All Other as well as Markets, non-interest revenues were up 18% and total Markets revenues were up 17%. Expenses of $14.2 billion were up 5%, with an efficiency ratio below 58%, which I will provide details on shortly. Cost of credit was $2.5 billion, primarily consisting of net credit losses in U.S. Consumer Cards as well as a firmwide net ACL build of $118 million. Looking at the firm on a year-to-date basis, we generated positive operating leverage with total revenues up 14%, driven by growth across all businesses and legacy franchises including the impact of FX translation, partially offset by a decline in Corporate Other, and expenses up 6%, as we reported an ROTCE of 13.1%. On slide 5, we show the expense and efficiency trend over the past five quarters. As I just mentioned, expenses increased 5%, primarily driven by our continued investments in the front office as well as higher volume and revenue-related expenses. This increase is reflected in compensation and transactional and product servicing costs. We also saw an impact from FX translation across our expense base. The benefits of our past investments and productivity efforts have allowed us to gain efficiencies across our expense base and reduce our headcount to 219,000, with over $800 million of severance incurred year-to-date. We continue to invest in areas such as technology, including AI, and we would expect increased productivity savings over time. It is worth noting this expense increase was against 14% revenue growth, resulting in an improvement in our operating efficiency of over 500 basis points. On slide 6, we show U.S. Consumer Cards and corporate credit metrics. As I mentioned, the firm's cost of credit was $2.5 billion, primarily consisting of net credit losses in U.S. Consumer Cards as well as a firmwide net ACL build. Our reserves incorporate an eight-quarter weighted average unemployment rate of 5.3% which includes a downside scenario average unemployment rate of nearly 7%. At the end of the quarter, we had over $22 billion in total reserves, with a reserve-to-funded-loans ratio of 2.5%. We continue to maintain a high-credit-quality card portfolio, with approximately 86% of balances extended to consumers with FICO scores of 660 or higher, and a reserve-to-funded-loans ratio in our U.S. card portfolio of 7.6%. Looking at the right-hand side of the slide, you can see that our corporate exposure is 79% investment grade, and in the quarter corporate non-accrual loans as well as corporate net credit losses remained low. We are confident in the high-quality nature of our portfolios, which reflect our robust risk appetite framework, rigorous client selection, and our focus on using the balance sheet in the context of the overall client relationship. Turning to capital and the balance sheet on slide 7, where I will speak to sequential variances: Our total assets of $2.9 trillion increased 4%, driven by growth in trading-related assets. Net end-of-period loans increased 4%, primarily driven by growth in Markets and U.S. Cards. Our $1.5 trillion deposit base remains well diversified and increased 3%, driven by growth in Services as we continue to deepen with clients with a focus on high-quality operating deposits. We maintained a 114% average LCR and over $1 trillion of available liquidity resources. In the second quarter, we continued to deploy capital to support client-driven growth while at the same time prioritizing the return of capital to common shareholders, as evidenced by the $4 billion in buybacks. We ended the quarter at 12.8% CET1 ratio under the binding standardized approach, approximately 120 basis points above the 11.6% regulatory capital requirement, as we continue to target a CET1 ratio around 12.6% under the existing rules and requirements. Our SEV remains at 3.6%. As Jane announced, we were pleased to see the continued improvement in our DFAST results and the corresponding implied SEV of 3.3%, which marks a reduction for the third consecutive year—demonstrating the execution of our strategy and improved business performance which has resulted in growth in PPNR and greater resilience in stress. As a reminder, we plan to increase our quarterly common stock dividend by 12% beginning in the third quarter, subject to quarterly board approval. Turning to the businesses on slide 8, this shows the results for Services in the second quarter. Revenues were up 18%, driven by growth across both TTS and Securities Services, reflecting the benefits of our continued investments in the business. NII increased 18%, primarily driven by higher average deposit balances. NIR increased 16% as we continue to see strong activity and engagement with both corporate and commercial clients and across key high-growth segments, including e-commerce and fintech. We are driving momentum across underlying drivers, with cross-border transaction value up 13% and assets under custody and administration up 22%, which includes the impact of market valuations as well as new assets onboarded. Expenses increased 5%, driven by higher volume-related expenses as well as higher performance and other compensation expenses. Average loans increased 10%, primarily driven by agency finance and working capital loans. Average deposits increased 19% with growth across both North America and international, largely driven by an increase in operating deposits as we continue to deepen relationships with existing clients and onboard new clients. Services generated positive operating leverage and delivered net income of $2.6 billion with an ROTCE of 30.9% in the quarter, and 29% year-to-date. Turning to Markets on slide 9, revenues were up 17%, driven by growth across both Equities and Fixed Income, with strong momentum across client segments including corporates, asset managers, hedge funds and banks. Fixed income revenues were up 7%, driven by growth in spread products and other fixed income as well as rates and currencies. Spread products and other fixed income were up 25%, driven by growth across both financing and credit trading in spread products as well as growth in commodities. Rates and currencies were up 1% with growth in currencies on higher volumes reflecting strong client engagement, primarily offset by lower revenues in rates. Equities revenues were up 45%, driven by continued momentum in derivatives and prime services, as we grew prime balances by nearly 60% with growth across both new and existing clients as well as higher market valuations. Expenses increased 8% driven by higher performance-related compensation and volume-related expenses. Average loans increased 29%, primarily driven by financing activity in spread products. Markets generated positive operating leverage and delivered net income of $2.4 billion with an ROTCE of 17% in the quarter, and 17.8% year-to-date. Turning to Banking on slide 10, revenues were up 34%, driven by growth in Investment Banking, partially offset by a decline in corporate lending excluding mark-to-market on loan hedges. Investment banking revenues increased 44%, reflecting a strong wallet driven by growth in DCM and ECM, partially offset by a decline in M&A. DCM was up 65%, resulting in our second-best quarter ever with growth across leveraged finance and investment grade. ECM was up 92% amid very strong market conditions, with growth across all products led by strength in IPOs and follow-ons, where we participated in eight of the top ten ECM deals of the quarter. While M&A was down 4%, we maintained a healthy pipeline and continue to have meaningful strategic dialogue with our clients. Corporate lending revenues, excluding mark-to-market on loan hedges, declined 4%. Expenses increased 7%, driven by higher performance-related compensation and investments, as well as higher volume-related expenses. Cost of credit was $242 million consisting of net credit losses of $138 million and a net ACL build of $104 million. Five percent growth in loans associated with investment banking activity more than offset the decline in corporate lending balances. Banking generated positive operating leverage and delivered net income of $350 million with an ROTCE of 18% in the quarter and 16.9% year-to-date. Turning to Wealth on slide 11, revenues were up 13%, driven by growth across all businesses, with 17% growth in Citigold and the retail bank, 5% in the Private Bank, and 3% in Wealth and Worker. NII increased 18%, driven by higher deposit spreads and average balances, partially offset by lower mortgage spreads. NIR was up 4% as we continue to see growth in investment fee revenues, which were up 20%, primarily offset by the absence of the approximately $80 million gain on sale of our alternatives fund platform which occurred in the second quarter last year and the loss of fee revenue from the sale of the trust business in 2025. Net new investment asset flows were $15.7 billion in the quarter, contributing to $56 billion in the last 12 months representing 9% organic growth. Overall, client investment assets were up 14%, which also includes the impact of market valuations and was partially offset by the sale of trust business assets. Expenses increased 3%, driven by higher technology costs and higher performance-related compensation. Average loans were up 5% as we continue to grow securities-based lending and deploy balance sheet to support clients and drive client investment as a growth lever. Average deposits were up 4%, primarily driven by growth in the Private Bank. Wealth had a pre-tax margin of 23%, generated positive operating leverage, and delivered net income of $583 million with an ROTCE of 14.4% in the quarter and 12.6% year-to-date. Turning to U.S. Consumer Cards on slide 12, as Jane mentioned, this quarter we completed the acquisition of the additional American Airlines co-branded card portfolio, and our results reflect the impact of the over $6 billion in loans for more than 2 million accounts onboarded in April. In the quarter, revenues were up 1%, driven by growth in NII, primarily offset by a decline in NIR. NII was up 5%, driven by higher interest-earning balances. NIR was down 47%, driven by higher accruals for partner payments and new account acquisition costs reflecting increased investments, partially offset by higher annual fees and net interchange. Including the additional American Airlines portfolio acquisition and momentum across underlying drivers, we saw general-purpose card acquisitions up 135%, spend volume up 12%, and average loans up 8%, partially offset by declines in private-label cards. Expenses increased 10%, driven by higher severance, customer engagement costs, legal expenses, and increased marketing as we invest to drive future acquisitions and continued customer engagement. Cost of credit was $1.6 billion consisting of $1.9 billion of net credit losses and a net ACL release of $232 million driven by improved portfolio quality including seasonal changes, largely offset by higher volume and changes in macroeconomic variables. U.S. Consumer Cards delivered net income of $852 million with an ROTCE of 22% in the quarter and 20.6% year-to-date. While we expect ROTCE to remain around our through-the-cycle target for the business in some of the next few quarters, we do expect expense growth to outpace revenue growth as we invest in the business to drive engagement and acquisitions, with some of those investments reflected as contra revenue and others as expenses. Turning to slide 13, we show results for All Other on a managed basis, which includes Corporate Other and legacy franchises and excludes divestiture-related items. Revenues were up 1%, driven by growth in legacy franchises, offset by a decline in Corporate Other. Growth in legacy franchises was driven by Mexico Consumer, which included momentum in underlying business drivers and the impact of Mexican peso appreciation, partially offset by the impact of continued reductions from our exits and wind-downs. The decline in Corporate Other was driven by lower NII, which included actions taken to reduce Citi's asset sensitivity due to a lower interest rate environment, largely offset by higher NIR reflecting episodic activity. Expenses were down 3%, driven by a decline in legacy franchises as lower expenses related to exits and wind-downs were primarily offset by the impact of Mexican peso appreciation as well as a decline in Corporate Other which included lower transformation expenses and severance charges. As a reminder, we will continue to look for opportunities to drive structural efficiencies including severance to improve productivity, and actions to improve our funding profile. Cost of credit was $438 million, primarily consisting of net credit losses of $366 million driven by loans in Mexico. We have reduced the total DTAs deducted from CET1 capital held in Corporate Other by over $500 million year-to-date. To close, we have included our full-year 2026 outlook on slide 14. We have made significant progress in terms of improving returns on the back of our investments, generating a year-to-date ROTCE of 13.1%. Having said that, we continue to target an ROTCE of 10–11% for the full year, supported by NII ex-Markets growth of approximately 5–6% and continued NIR ex-Markets growth driven by momentum in Services, Banking and Wealth, partially offset by U.S. Consumer Cards. We expect U.S. Consumer Cards' NIR to remain in line with the second quarter's absolute level in the third and fourth quarters of this year. In Markets we historically have seen revenues decline approximately 20% between the first and second half of the year, and given the strong performance year-to-date, the magnitude of that decline could be greater this year. As we have said before, we expect our full-year efficiency ratio to be around 60% as we ramp up investments across the businesses in the second half and incur additional severance as we target future efficiencies. As it relates to credit, we continue to expect total U.S. credit cards NCL rate between 4–4.5% while the ACL will continue to be a function of the macroeconomic environment and business volumes. We remain well positioned to return capital to shareholders under our $30 billion share repurchase program. As a step back, the results in the second quarter and first half of this year represent significant progress towards our goal of improved firmwide and business performance. We remain steadfast and focused on executing our transformation and confident in delivering our ROTCE target of 10–11% this year, with a clear path to delivering higher sustainable returns going forward as we laid out at Investor Day. With that, Jane and I would be glad to take your questions.
分析師問答
At this time, we will open the floor for questions. If you would like to ask a question, please press 5 on your telephone keypad. You may remove yourself at any time by pressing 5 again. Please note you will be allowed one question and one follow-up. Again, that is 5 to ask a question. We will now pause a moment to assemble the queue. Okay. Our first question will come from Glenn Schorr with Evercore ISI. Your line is now open. Please go ahead.
Hi. Thank you. I am a huge fan of investing back in the business during great times, and I heard your message loud and clear. We see your guidance, but people are trying to parse through the not upping of the ROTCE target this year. How much—if you can quantify in numbers—is how much of it is conservatism and not knowing what is ahead in the second half versus investments you have already made versus investments you are going to make in this second half? I am trying to get through the parsing of it. Thank you.
Okay. I may take that, Glenn. Well, I have to say with a good first half under our belt, we have shifted our focus from the 2026 waypoint to the near-term and medium-term targets and the investments behind them. As you say, we have operated in a good environment so far this year. I think the whole industry has benefited from revenue growth and benign credit. What I am most proud of is that we have generated real alpha—outperformance that we created. It is not just a rising tide, and you have seen us pair that with consistent expense and capital discipline while investing. How strong the second half turns out largely depends on the macro and the market backdrop. That is true for everybody. We are deliberately investing for long-term growth and for improved returns. A few weeks ago we laid these out in the investment plan in detail at Investor Day, and you see we have a lot of opportunities here. We are funding these investments whilst holding our efficiency ratio for the year around 60%, and there is real discipline beneath that number. To be clear, if conditions stay constructive, we intend to take full advantage of that. We will lean in, bringing forward investments and other actions that will create value for our shareholders over the medium term. A stronger environment is not just upside to report; it is an opportunity that we are going to put to work. So I am very comfortable with our 10–11% number.
Is the comp the tenth—you know, doing I am good at math. A 13% for a half and 10% to 11% would mean significantly lower in the second half. I am just trying to get at, is that conservatism based on, like you said, 20% seasonality and more this year because the first half was so good? Should we be expecting possibly single-digit to 10% return with no additional investment? Thank you.
I will take this one. I may disappoint you in not giving you precise math, but it is a fair question. First, there is a pocket of uncertainty that we want to make sure we navigate. We have spoken about delivering under a variety of environments for our near- and medium-term targets. Secondly, the seasonality you mentioned especially relates to Markets—not exclusively, but Markets is the most pronounced. Third, we want the flexibility to take advantage of opportunities if markets are constructive. That could take a couple of flavors: we could lean into the investment themes we discussed at Investor Day across the five businesses and accelerate them; we could accelerate structural efficiency actions and therefore take more severance in the second half; or we could take structural funding actions if we see opportunities to improve our funding profile. You saw us tender $1.2 billion of debt in Q2. The goal is not to maximize a waypoint but to improve the durability of returns going forward. Thank you.
Your next question will come from Mike Mayo with Wells Fargo. Your line is now open. Please go ahead.
If you are Gonzalo, and if you are going to be the Messi of CFOs, I think we need to understand a little bit more about your prior answer. I think what you are saying is you will use excess earnings above what you expected to front-load or accelerate structural changes that will improve your future funding efficiency and growth. But the problem is 13% return in the first half would imply 9% in the second half to hit 10–11% for the full year. Efficiency was 57% in the first half; to get to 60% for the full year would imply maybe 63% in the second half. I think the market is hearing that you are guiding for a much worse second half than the first half, and that may or may not be your intention. Could you clarify what you really mean about expenses and what areas you would like to accelerate spending on when it comes to revenue growth?
Mike, let me jump in. We are focused on the near-term and medium-term targets, not on a waypoint number. I cannot imagine an investor who does not want us to take full advantage of market conditions, particularly if they are good in the second half, to make the investments and actions that will drive growth for the next several years. That is the message we want the market to take away. Gonzalo, over to you.
I think we are in sync. We are not saying we expect a worse second half. There is seasonality, and that plays through especially in Markets. But we are looking to Jane's point: if the environment is constructive, we will take advantage of opportunities. That could be accelerating investments across the five businesses, accelerating structural efficiency actions (which could mean more severance in the second half), or taking actions to improve our funding profile. Year-to-date severance is already $800 million. We are open-minded—if we see opportunities we may do a bit more than originally envisioned. The intent is to strengthen durability of returns over the medium term.
A question related to remediation efforts: last quarter you said you are 90%+ done. Do you expect to be 100% done sometime in the near term? Are we at 93%, 99%? Do you think you get to 100% and then turn it over to the regulators to make their decision?
I am not going to play the numbers game on 95%, 96%, or 97%. We are largely operating at Citi's target state. The important point is a large amount of our work on the consent orders successfully passed audit validation this past quarter and can be handed to our regulators. We have remaining work, particularly enhancing data governance for regulatory reporting, and we continue to make steady progress. Timing for the removal of consent orders is at the discretion of our regulators. Whenever we complete bodies of work, we begin taking remediation expenses down and you can see that in our expense line. That is creating capacity to further invest in the businesses—the additional $5 billion of investment we talked about in May—and we do not need to wait for the orders to close to do this. That is happening already.
Your next question will come from Ken Usdin with Autonomous Research. Your line is open. Please go ahead.
Thanks. I have a question on NII ex-Markets. Strong start in the first half where you are already at the top of the 5–6% range for the year. Deposit growth continues to pace, especially in Services. Do you have any conservatism in that outlook? Why might you not be able to do better than 5–6% on core NII ex-Markets given the trends so far?
Good morning, Ken. NII ex-Markets is a good window into our strategy working and our operating rigor. We remain constructive and are comfortable with the guidance. To recap, NII ex-Markets guidance for the year is 5–6% revenue growth anchored by mid-single-digit growth in underlying drivers. In Q2, our NII ex-Markets growth was 6%, which is within the guidance range. Deposits grew about 12% on average for the quarter, with Services at 19%—very strong momentum—Wealth at 4%, and loans growing mid-single digits at around 6% year-over-year for the quarter, supported by Services, Cards, and Wealth. We do expect some normalization of the deposit growth over time; the 19% was a very strong quarter for Services. Importantly, much of that deposit growth is operating deposits, not low-value deposits, and the team has been disciplined on pricing. That is where you are seeing the NII pop up. We are pleased with the trajectory and comfortable with the guidance.
One follow-up: you mentioned potentially some additional severance in the second half. Can you remind us of the severance you took year-to-date in the first half, and the type and magnitude you might book in the second half so we can understand how bulky that might be and his impact on run rate?
While we will not provide exact guidance for second-half severance, I can recap what we have done. Q1 severance was about $500 million and Q2 was another $300 million, for $800 million year-to-date. That is roughly the same level as last year, which was about $800 million. When we gave guidance for the year, we expected severance to be around that same level or slightly below prior year. If we see opportunities and choose to accelerate structural efficiency actions, we may take more severance in the second half. Our structural efficiency plan is anchored in three legs: stranded cost reduction (we are already down from $1.3 billion a year ago to a current run-rate of roughly $800 million), transformation cost reductions as temporary programs finish (a portion sits in Corporate Other), and productivity opportunities from technology and AI automation—over 100 processes mapped end-to-end where we see automation opportunities. We review these opportunities weekly and, if appropriate, may accelerate some of these actions in H2. We are not providing a specific number now.
Your next question will come from Ebrahim Poonawala with Bank of America. Your line is now open. Please go ahead.
Hi. Good morning. On the second half messaging: I understand the revenue environment could be stronger and you will invest if that happens. Given your momentum in the first half and seasonality in the third quarter, are you saying we could replicate the first-half strength if the revenue backdrop remains strong, or should we expect a step-down due to seasonality and pulling forward investments? In other words, what should we expect for the second half?
Good morning, Ebrahim. Let me emphasize a couple of points. First, we are pleased with momentum and we are not planning to stop the commercial intensity, execution rigor, and focus—the good results we are seeing from past investments. If the environment is constructive, we expect continued momentum. Services had strong engagement and higher win rates with new mandates and deeper relationships; Markets had a very good quarter and we are investing in talent and technology; Banking has momentum driven by investment banking activity; Wealth is improving returns with NNIA growing; and Cards is a high-return business where we are investing to acquire and deepen relationships. All of these can sustain momentum, but we are accounting for uncertainty and seasonality and want flexibility to position the firm better for the future. On Cards specifically, you saw the drivers in Q2: through-the-cycle return target for Cards is low-20s ROTCE, and we maintain returns discipline across our proprietary book and partner relationships. Our strategy has shifted to general-purpose cards—82% of the book was general-purpose at year-end and is at 84% this quarter—and we are intentionally investing in the business now. Over the next few quarters you should expect expense growth to outpace revenue growth in Cards as we invest, with some investments showing as contra revenue and others as expenses. We are confident those investments pay off over time.
Your next question will come from John McDonald with Truist. Your line is open. Please go ahead.
Hi. Good morning. Gonzalo, could you remind us on the capital target: you mentioned around 12.6% for now, and at Investor Day you noted 13.1% by 2028 to accommodate a higher G-SIB. What could lead that to be better along the way between potential rule changes, structural improvement at Citi, or lowering of your discretionary buffer? Some thoughts on the capital path, please.
Sure. We ended the quarter at 12.8% CET1, about 120 basis points above the 11.6% regulatory requirement. Regarding future moves, three areas matter: the final Basel III and G-SIB rules (including the SEV), which in our early analysis are moderately net positive because of the G-SIB coefficient and some RWA weight changes, partially offset by operational and market risk impacts; the stress capital buffer (SCB), where improved DFAST results have reduced our implied SEV; and our own performance, which improves PPNR and loss absorption. The improvement in DFAST this year—a 30-basis-point implied SEV reduction and the third consecutive year of improvement—shows our strategy is working. We are comfortable where we are and are managing around a roughly 100-basis-point buffer, but we will wait for final rules and continue to monitor opportunities to improve our position.
A follow-up on DTA utilization: can you give more color on what drove the step down this quarter and the path over the next two years from the $13 billion level toward $7 billion?
DTA is an area where we must demonstrate performance. Our starting position at the end of last year was $13.9 billion of the disallowed portion of the DTA. We are at $13.4 billion now—so about $500 million consumed year-to-date. There is a carryback support that builds in Q1 and then wears off during the year, so some seasonality is expected. U.S. profitability is improving—our disclosed U.S. profitability was about $4 billion last year and we expect to make good progress this year. You are seeing the evidence in deposit growth in Services (much of it North America), strong Market and Banking activity, improved Wealth returns, and high returns in Cards. All those elements improve DTA utilization. I guided earlier in the year to a full-year target of $800 million of DTA burn down; we have done $500 million of that year-to-date.
Your next question will come from Manan Goswami with Morgan Stanley. Your line is open. Please go ahead.
Hi. For the elevated investment spend in the back half of the year, can you help with specifics—what investments you planned for 2027 that you now have the opportunity to do in the back half of this year? How quickly do you expect to see returns from higher investment spend—could this get you to medium-term targets sooner?
At Investor Day we laid out the specific investments in quite a lot of detail. We will look at pulling some of those forward across the board. There is nothing specifically inorganic—these are organic investments. Assume we're considering a number of the investments we discussed where pulling them forward is accretive. If there is any severance tied to accelerating productivity gains, we will do that as well.
Got it. And maybe on the investment banking pipeline: clearly very strong performance this quarter. You noted M&A pipeline is strong. How are you seeing revenue opportunities across that business looking out to the next year or so?
The level of activity is very strong and the pipeline is healthy. CEOs are deciding whether to invest for growth or preserve optionality; AI is dominating many conversations, and tech, data centers, energy, and defense CapEx is accelerating. Companies are accessing equity and bond markets alongside bank debt in size—SK Hynix last week is a good example, which we led. Wherever there's a bottleneck in the energy/compute/memory ecosystem we are seeing activity. We'll likely have a summer lull, midterms, and geopolitics is the wildcard, but we enter the second half with a good pipeline.
Next question will come from Jim Mitchell with Seaport Global. Your line is open. Please go ahead.
Afternoon. A follow-up on capital: the stress test showed about 30 basis points of improvement. With model enhancements likely to lower volatility in the SCB going forward and profitability improving, is there a time when you start to question a 100-basis-point buffer? Could you run a thinner buffer and use excess capital while your stock is at a low tangible book multiple?
Let me re-emphasize Gonzalo's comments: we are not changing the buffer right now. There is still uncertainty in the geopolitical and regulatory environment. We are focused on continuing to strengthen PPNR, lowering stress losses, and getting models to accurately reflect our business—models that we think currently overstate risk in a number of areas, such as treatment of our DTA and potential double counting of operational and market risk. The biggest upside will come from final rules that more accurately reflect actual risk. Until rules are final, we will not know, so we are being disciplined.
On Cards: delinquency is down despite fears about the consumer. What are you seeing in consumer credit and behavior and do these favorable trends appear to be continuing?
We are seeing a stable credit environment. The U.S. consumer has been resilient—spend is healthy. Even excluding the Barclays/American Airlines book, spend growth is around 6–7% ex-gas inflation, which is healthy. Delinquencies and net credit losses are down year-over-year across portfolios. Leading indicators in collections and other metrics point to a stable environment. That's why our guidance for U.S. credit card NCL rate of 4–4.5% is anchored on actual trends and is a conservative range relative to the past. We continue to monitor watch points such as inflation, wage dynamics, savings rate, and unemployment, which could affect consumer stress, but so far the environment is constructive.
Your next question will come from Erika Najarian with UBS. Your line is open. Please go ahead.
Hi. One follow-up on the investment agenda: you are pulling forward investments—will that enable you to hit the near-term targets and potentially be in the better half of those ranges? Also, does the consent order being lifted free up additional expenses to reinvest in the franchise?
The outperformance gives us optionality to invest or pull forward where accretive. If investments are not accretive, we'll let results flow through. The message is that we see opportunities to invest behind higher sustainable returns and will take them where it makes sense. On consent orders: timing of lifting is in regulators' hands, but the timing of taking expenses down is our decision. As we finish bodies of work, those expenses come down and help fund further investments into the businesses.
Next question will come from David Chiaverini with Jefferies. Your line is open. Please go ahead.
Thanks. Strong deposit growth this quarter and cost of interest-bearing deposits was stable at 2.71%. How should we think about deposit costs going forward?
Thanks, David. Think about deposits by major business. In Services, we drove 19% year-on-year average deposit growth and reached $1 trillion, and much of that is operating deposits. We are disciplined on pricing; betas are within our expectations and Shamir and the team are focused on pricing discipline. You may see some mix effects if North America grows faster because North America is more competitive, but overall the catch-up pricing we've seen has been in line with expectations and we are not chasing low-value deposits. In Wealth, pricing is thoughtful as well; some customers seek yield and you can see pockets shift into time deposits. Overall, NII and spreads remain generally robust and we will maintain discipline on pricing.
Great. On Services: very strong growth this quarter at 18% year-over-year. How should we think about this relative to your medium-term outlook at Investor Day of low- to mid-single-digit growth? What might lead growth to slow toward that guide?
Good question. Several factors: one primary one is normalization of deposit growth—2022 to 2025 annualized deposit growth was about 3%. We are seeing a growth spurt and we expect some normalization over time. On NIR you saw 16% this quarter, supported by cross-border transactions, security services, AUC/AUA growth, and market valuations. We are seeing alpha—win rates on new mandates and deepening relations. For medium-term guidance, we plan for our returns and targets to be delivered under a range of environments and are not assuming the recent high growth will perpetuate indefinitely. There are scenarios where you could do better, but some of it is market dependent.
Your next question will come from Mike Mayo with Wells Fargo. Your line is open. Please go ahead.
Let me try again on the investment question: is the accelerated second-half investment spend defensive or offensive—both? You spent the last decade on restructuring and are almost done. Is this another restructuring or are you investing offensively for growth—AI, payments, gaining share in payments? Give context: is this defense or offense?
It is 100% offense. We laid out at Investor Day a clear path to drive returns further in each business. We are on the front foot. These are organic investments to drive long-term growth and improved returns. We are not planning moves just to hit a waypoint; we will invest in accretive opportunities to support our medium-term targets. This is a firm growing nicely and easier to operate; we will pull forward accretive investments when warranted. We are playing the long game.
I would add that we are focused on returns discipline and tight tactical expense management. If we see productivity opportunities from automation and AI that can accelerate value, we will act—potentially with associated severance—but that is to fund growth and improve longer-term efficiency. We are not talking about another restructuring for the sake of it; these are investments to capture growth in high-return franchises.
Your next question will come from Gerard Cassidy with RBC. Your line is open. Please go ahead.
Jane, Gonzalo: Citi has a unique lens as a U.S.-domiciled bank with global reach. In your Services business, which is very engaged globally and had a very strong quarter, how are companies producing such strength given an elevated geopolitical situation? Have they learned lessons from the pandemic and become more conservative and better managed? What's your take on the health of the global corporate customer?
I believe the global corporate client base we serve has been both resilient and a source of growth. They have strong balance sheets and diversified revenue streams, enabling them to balance tariffs and shocks. Companies have learned to be adept at supply chain repositioning and adaptation to energy shocks and other disruptions, and they adjust quickly. European companies are seeking growth in the U.S. and Asia; U.S. companies are benefiting from AI-driven investment and the resilient U.S. consumer; China is seeing growth from export intensity; and the AI-driven electronics upcycle is a genuine tailwind across parts of Asia. These dynamics benefit Citi's client base and are reflected in their growth and balance-sheet strength.
On a related point: in the U.S. the administration appears supportive of M&A. Do you see similar support in other parts of the world—are governments facilitating consolidation?
In a word, no. Europe is almost the opposite. They are not allowing the emergence of new champions and often favor national consolidation. We need a strong Europe. Asia sees some activity but not at the same scale as the U.S. The U.S. remains unique in entrepreneur energy, breadth of funding markets, and leadership in AI, which drives activity here.
Your next question will come from Matt O'Connor with Deutsche Bank. Your line is open. Please go ahead.
You successfully exited about a portion of Banamex and I think you said further exits would be after this year. What are the latest thoughts on timing and why not sooner, given the positive macro backdrop and the successful exit of the first half?
We do not expect additional sales in 2026. That gives the new investor group runway to drive value creation; we are already seeing performance improvements. We expect to deconsolidate our ownership in early 2027, followed by an IPO as market conditions allow and further sell-downs thereafter.
Remind us roughly how much capital might be freed up, recognizing valuation uncertainty and capital tied to the business—how much capital could be freed to offset earnings give-up?
I would remind you that upon sale there will be a sizable CTA hit, which is capital-neutral; that's important in the timing around early 2027. Gonzalo can speak to the approximate capital and RWA figures.
The short answer on the capital piece is around $5 billion of capital release, and the RWA tied up is a little over $40 billion.
Your next question will come from Saul Martinez with HSBC. Your line is open. Please go ahead.
One question on Cards: you've invested—launched Strata Card, bought the Barclays portfolio. When I look at best-in-class peers, they spend several billion in marketing. Is it an acknowledgment that you need to be more aggressive on promotions, marketing, campaigns, and benefits? How should we think about the magnitude of incremental investment in H2? You mentioned expenses exceeding revenues already this quarter—what size is the investment going forward?
Short answer: we will increase marketing spend. At Investor Day we outlined this: investments across the flywheel—product, marketing for customer acquisition, partnerships, our lifestyle platform, and importantly AI to drive scale economics. All of this will translate into growth, and you should expect higher marketing spend to drive customer acquisition for the long term. These investments do not pay off immediately and some will show up as contra revenue, some as expense. Also, when I said operating leverage in Cards, I meant in the Cards business specifically, not the rest of the firm.
We are not providing specific spend guidance by business today, but Cars is a highly competitive, high-return area and we are focused on share gains over the near and medium term. You can see the combination of portfolio acquisitions like Barclays and American Airlines and other investments such as Strata and loyalty work. We are focused on driving sustainable, high-return growth and it will take time, but we are committed.
Your next question will come from Chris McGratty with KBW. Your line is open. Please go ahead.
Thanks. On Wealth, Slide 11: improvement in pretax margins year-over-year is notable and NNA growth is strong. Any color on what's changing? Any recent wins would be helpful.
Wealth is steadily translating growth into returns. Revenues up 13% year-over-year (closer to 16% normalized for one-offs) are converting into higher returns. The drivers: integration of the retail bank into wealth is increasing client conversion from deposits to wealth activity; we're capturing wealth creation globally through our network and relationships; and investments in technology and advisors are furthering client engagement. The business is firing on all cylinders as we march toward our 15–20% ROTCE target.
Your next question will come from Kun Peng Ma with China Securities. Your line is open. Please go ahead.
Thank you. A follow-up on Services: very strong TTS NII growth—besides deposit volume growth, was there tailwind from higher-for-longer rates? If rates are not higher for longer, how should we forecast the mix of TTS revenue growth? Also, can you provide more geographic detail beyond U.S. vs. ex-U.S.? I am based in China and see strong demand here but it's competitive. How is Citi growing market share in China and Asia?
We won't provide more granular geographic breakdowns, but the growth you see in Services is firing across geographies. Institutional market share is up 120 basis points year-over-year; client wins are up 36% year-over-year. We have been focusing on increasing share with asset managers—up 250%—and fintechs—up 20%. Much of the growth beyond rate-driven effects comes from product innovation. Clients choose Citi for innovation, and as we lean into disruption, we see new vectors of growth—AI is opening up many of those. So, when you think about the business going forward, you can be confident in continued momentum in fees and volumes, with rate moves layering on top as they occur.
Your next question will be a follow-up from Mike Mayo with Wells Fargo. Your line is open. Please go ahead.
Let me try again on investments. Is the H2 acceleration defense or offense? You previously spent the decade on restructuring; now most of that work is done. Are these investments repairing lost share, or growing share? Are you doing more with legacy systems, or is it offense—AI, payments, gaining more market share in payments? Please be direct.
This is offense. We are investing in growth. We laid out specifics at Investor Day and we are pulling forward accretive investments. We are not focused on a waypoint. If opportunities are accretive to shareholders and support our path to medium-term targets, we will pursue them. This is a firm on the front foot.
To add, we are keeping a sharp focus on returns and maintaining tactical discipline. If we see productivity opportunities from automation and AI that can be accelerated, we will act—potentially with more severance—but only to the extent it funds higher sustainable returns. This is about improving the long-term economics of high-return franchises, not another broad restructuring unrelated to growth.
Your next question will come from Gerard Cassidy with RBC. Your line is open. Please go ahead.
Can you share your view of the unique lens Citi has on the global view—how the global corporate customer is performing? Are companies more conservative after the pandemic? Do they have better balance sheet management?
Many corporate clients are better managed and more resilient. Strong balance sheets, diversified revenue streams, and greater skill in managing supply chains and shocks have made them more adaptable. Different regions have different dynamics: European companies are seeking growth outside Europe; the U.S. is a source of demand driven by AI and strong consumer spending; and parts of Asia benefit from the semiconductor and data-center upcycle. Overall, our global clients are in good health and that underpins our performance.
Your next question will come from Saul Martinez with HSBC. Your line is open. Please go ahead.
On Cards, what's the plan relative to competitors' marketing spending? Will you be more aggressive? How should we think about the size of incremental investment?
We will be increasing marketing spend. At Investor Day we described the investments across product capabilities, loyalty and engagement, customer acquisition, partnerships, and AI. These investments are aimed at long-term customer acquisition and engagement—some pay off over multiple quarters and years. We remain disciplined on returns and focused on acquiring high-return customers.
We are not disclosing exact spend levels, but Cards is a long-term, high-return business for us. We will invest incrementally to drive share, combining portfolio acquisitions like Barclays/American Airlines with organic spend in loyalty, product, and marketing. We are focused on sustainable returns and measured investments.
Your next question will come from Chris McGratty with KBW. Your line is open. Please go ahead.
Just a clarification on Wealth: can you give examples of recent wins or client segments performing particularly well?
We are seeing strength across Citigold and the retail bank, the Private Bank, and Wealth Management. Specific drivers include the integration of retail and wealth (referrals up 23%), greater advisor productivity via tools like Wealth Advisor Insights, and strong net new investment asset flows—$15.7 billion in the quarter. These are translating to improved returns and momentum across segments.
Your next question will come from Kun Peng Ma with China Securities. Your line is open. Please go ahead.
For TTS and Services NII growth, if rates are not higher for longer, how should we model growth mix? Also, how is Citi competing in China given local competition?
We won't provide granular geographic forecasts. If rates normalize, some portion of NII growth will moderate. However, much of the growth we saw this quarter is driven by operating deposit capture, cross-border flow growth, account wins, and product innovation which are more structural. In China and Asia generally, we compete by leveraging our global network, product innovation, and client relationships. That differentiator helps us win mandates even in competitive markets.
Our next question will be a follow-up from Mike Mayo with Wells Fargo. Your line is open. Please go ahead.
Let me try once more: is H2 investment spend defense or offense? Are you fixing legacy systems or going after growth areas like AI and payments?
Offense. We are investing in growth across the firm—AI, payments, product, people. These are organic investments to capture growth opportunities and drive higher sustainable returns. We are not focused on short-term waypoint maximization; we want durable returns and will invest to achieve that.
I would only add we will maintain tactical expense discipline and use structural efficiency levers to fund growth. Where we see clear productivity and automation opportunities, we may accelerate and that could entail near-term severance, but the objective is to improve long-term economics.
For our final question, we will return to Gerard Cassidy with RBC. Your line is open. Please go ahead.
On the second-half incremental investment expense: can you ballpark what might be tied to severance in that number—half, a third, a quarter?
We are not providing a breakdown or guidance on second-half severance. First principles: sharp returns focus, tight tactical expense discipline, and leaning into structural efficiencies. If we see opportunities among our 100+ mapped processes for automation, we may accelerate and that could involve additional severance, but we are not giving a specific split at this time.
There are no further questions. I will turn the call over to Jennifer Landis for closing remarks.
Thank you. Before we conclude, I would like to thank Jane, Mark, Gonzalo, Ed, and the entire investor relations team, especially Tim Rogers, for their trust, partnership, and support during my time leading investor relations. It has been a true privilege to represent Citi and work with such dedicated teams across the firm. I have thoroughly enjoyed the insightful conversations with our investors and analysts over the past five years. I am delighted to welcome Margot as she takes on her new role, and I know the team will benefit greatly from her leadership and perspective. Thank you again for your partnership and support. We look forward to talking to you this afternoon. Thank you.
This concludes the Citi second quarter 2026 earnings call. You may now disconnect.